17 Mar 2015, 12:50pm
personal finance
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  • Why doesn’t the middle class understand how bad their situation is?

    Matthew – Assets £700k, age 42, two children, SAHM, GSOH. Wants to meet lifetime income of 40k in 2015 terms to enjoy the rest of his life

    So he’s in the plush City offices of independent financial advisers Ermine, Ermine and Ermine Ltd and there’s a gimlet-eyed white mustelid  sitting behind a big leather desk with oak-panelled walls and one of those green banker’s lamps on it.

    Good grief, Matthew. According to the Trinity study a 4% SWR you will get an income of £700,000 /25 = £28,000 1. That’s not that far short of £40,000, so ease off on the consumerism by about 25%, send that SAHM out to work – those kids are 13 and 15 FFS, and then you can have your well earned break. Next!

    Maybe not…

    Let this book tell you a story about the middle classes, Matthew

    It never fails to surprise me how much the so called middle classes haven’t realised just how deep the shit is that they’re in. Matthew is thinking along the right lines – he’s not that far away from the dreaded 45 so he doesn’t want to rely on making shitloads of money as he was. But there are some unfriendly trends happening, which he wants to think about. He could do worse that listen to the story this book I’ve been reading tells him.

    Broke

    Broke

    The first part of the story is told by the physical book and how it came into my possession. It is clearly a fairly new library book – the Ermine is all for library books, because I can educate, inform and entertain myself for free, and not only that, but I don’t have the problem of storing clutter after I’ve read it. And I borrowed this from Suffolk libraries.

    I had to pay £1 for that, because Suffolk Libraries have stopped buying books to a large extent because of cuts. They have been resourceful, and struck a deal with neighbouring county Cambridge. The computer systems can search across both book collections, but as a Suffolk resident I have to pay £1 to borrow from the Cambridge holdings. Now I don’t mind, in the end I can afford to pay the odd £1 to read a book,  but it’s a tiny metaphor for where things are going. One of the reasons Suffolk council had no money is they pay shitloads to their chief executives, step forward Andrea Hill paid £200k to outsource everything, including the libraries. Eventually the charge will rise until it meets the price of alternatives like a Kindle book/secondhand copies on Amazon and then the outsourced operation will go bust. I am pleased to observe we now pay only £150,000 for the head honcho of the council Deborah Cadman, and intrigued by the implied nepotism of her husband getting the job she vacated at St Edmundsbury council. Jobs for the boys, eh? I’m sure it was all above board, and I’m still puzzled why it costs more to run Suffolk than that Cameron chap costs to run the country.

    In itself the degradation of the library service isn’t the sort of thing that will impact Matthew’s finances, but it is a harbinger of tougher times to come. There is another service that is degrading which most of us get to use sometime. The same outsourceing thinking is applied to the NHS as decribed in “Serco grapples with watershed [Suffolk] NHS contract” [and makes a pig’s ear of it]. I would be very surprised if in 10 years time the NHS were free at the point of use, or so degraded that if you were used to the sort of lifestyle Matthew were used to you wouldn’t want to wait. Some of my excessively large emergency fund is set against that sort of thing – and I am so far in good health for my age, but I wouldn’t want to wait months for a hip operation were that necessary in 10 years time, so I would pay for that sort of thing privately (it’s about £12,000). There are some things you can’t buy your way out of at any reasonable price; in the end you gotta go some time and you may be better off saving the money and letting it go.

    I am about a decade older than you, Matthew, so I will die 10 years earlier. You will experience more of this erosion of public services, so you at least need to think about how you are going to buy your way out of it. Not all of your money is going to go on skiing, holidays and paying your children through university. Some of it will go on health insurance. Hopefully Britain will adopt the German or French method of co-payment rather than the ghastly US system which is fantastic for the rich with the best medical care in the world, but keeps frightened wage-slaves pliant to The Man in fear of losing their health insurance. I believe the ‘free at the point of use’ is part of the problem – there should be a small, flat charge for visiting a doctor, similar to the €23 cost for this in France.

    The rich have always lived longer, on average, than the poor. It’s not stupendously surprising, but Matthew would be unwise to ignore the straws in the wind. Like me, but more so 2, he is on the way down, not up in this fight against the 1%. And that’s just the story told by the library charge, the contents of the book will make you blanch, Matthew.

    Let us purview the rest of your situation. Ah, children, it’s the way the modern world really gets to the middle classes. On the upside, there are only two, which is good. You need to be rich or poor to afford more these days, let’s hear it for poster child Shona and the trouble her four got her into. The time will soon come when the middle classes will only be able to afford one child if they want to keep it in the lifestyle they believe they are entitled to. Let us assume that that nice man Mr Miliband gets in, so your eldest goes to university with £6000 p.a. fees, and let us assume a student needs £4000 p.a. for accommodation and beer these days, making a nice round figure of £30,000 for a standard three year course. You need to find twice that because you have two children, which in my book is a knock of £60k, 10% of your capital assets

    The question, of course, has to be is this a useful allocation of capital? After all, invest it and it’s an instant boost of £1200 a year for her for life, sort of inflation protected. It would be a useful deposit on a house, outside London. You have to set this against the tax-like version of student loans  – see MSE’s discourse on this which derisks the financial case if they take the loans. Bearing in mind that there are the twin massive forces of automation and globalisation tearing middle-class jobs out of the economy, there’s a strong case to be made that university is an unaffordable luxury – basically your children will be less able to build wealth by earning money across their lifetime particularly if they want the lifestyle you had, and inherited wealth is possibly much more important. So if if you want to make sure your children have a decent future then:

    • Don’t have too many, because it splits your estate
    • Have them late, because then they will get the inheritance earlier in their lives, (you will die when they are younger) That also helps damage the career of the primary caregiver less.
    • Teach them the values of grit and determination
    • Don’t autopilot on university. A degree was much more valuable in the 1960s and 1970s when <11% of people went, as opposed to 50%. Looking at some of the illogical thinking, rotten grammar and mush written by university-trained intern journalists now compared to the school-leaver journos of yesteryear the Flynn effect is obviously too slow to have made four times as many people academic in the last couple of generations. We’ve simply lowered the bar, which is a git because now employers can’t tell the bright from the dim bulbs and everybody has to pay because there are five times as many students as there were when the taxpayer supported them through university. I personally would like to see the taxpayer support students through university again, but I’d like to see a much lower percentage go, no more than 15% with full grants for tuition. If you can’t pass the exams, well, I guess there’s nothing wrong in paying for a vanity degree…

    Anyway, on to other things

    Rule 1 on page 1 of the book of personal finance is know thyself. Without self-knowledge you are doomed

    Hmm, so you realise you are “quite risk‑averse”, do you, Matthew? Absolutely nothing wrong in that, and indeed holding nearly half a million in cash would seem to support the assertion. I thought I was mad holding more cash than property, but I tip my hat to your good self. And yet on the other hand

    “waiting for a stock markets crash – after which I would dive in”

    Matthew, me old mate, do you have any idea of just how hard that is to do? I did it in 2009, and I had to fight the primitive lizard-brain every inch of the way. Do you know what it feels like to lob cash into a diving market and see yourself lose 25% of it in the next few weeks, and do you know how you have to practically seize one hand with the other to stop selling back out because every part of everything is telling you wrong way, step back, run for the hills, Gateway to Hell and total oblivion this way?

    That is just not something risk-averse people do. Know thyself. Risk averse people need to be sated with the general long-term lift of the market over many years, which is sort of 5% real though there’s good reason to think it may be a bit lower. Passive, index investing is what you need. Spend the time you save on otherwise obsessing about money with your kids, Matthew, the days are long but the years are short. You’ve already missed five-sixths of your eldest daughter’s childhood and two-thirds of the youngest…

    Mr and Mrs Ramsden also want to invest some of the capital in a business venture together. He’s thought about setting up an auction house but Mrs Ramsden plans a tea room.

    People in business are not characteristically risk-averse. Else they wouldn’t do it, given the ghastly odds of 50% failure in the first two years, more so in the restaurant biz. Cripes…

    There’s hope. A word in your shell-like – cut spending

    Unlike some of the other wannabee early retirees, with a bit of  cutting his cloth to match his resources Matthew could do well. He needs to lose that £40k figure – he’s just not that rich. Half of it, however, he do do without breaking a sweat. If he really has had the experience of

    20 years of constantly working hundreds of miles away from his family

    he is probably used to a high-spending lifestyle while away, all on expenses and making up for the rotten nature of that sort of thing. For a few years I worked on a project that involved international travel about once a month, and that was about right, particularly as I was single at the time so I could use the travel opportunities. But even then, all the married colleagues with kids were frazzled and hated it and were always rushing back. If you are doing much more of that you spend loads of money because, fundamentally, you are bored in the downtime – one hotel room looks pretty much like another, you’re too frazzled from long days to do much tourism  and you are looking forward to the weekend. That’s why such jobs pay well, because they’re a little bit shit in the lifestyle department.

    There’s probably room to spend less but live more. I think he can do it. But it’s not a financial makeover he needs. It’s a lifestyle makeover – a what am I doing, what really matters to me, what are the risks and opportunities ahead drains-up. It’s not surprising he wants to downshift after that. He could also do with harmonising these life goals with his wife – after all in five years his children will be adults. If he and his wife want that £40k then maybe they could consider working at a low level, though the way this is going a 20 year gap it’s not going to look good on his wife’s CV.

    As for those IFAs –

    Okay, they agree with the general principles of the Ermine IFA partnership of cynical mustelids. I found the second IFA to be much more on the mark with the fundamental  issues. Matthew’s primary problem is not that he hasn’t got enough money, it is that he doesn’t know himself, so he doesn’t know what he wants. He knows what he doesn’t want, but ‘anything but this’ is a dangerous way to map your path. You’ll struggle in getting from London to Scotland just knowing you need to get out of London. You might end up in Bognor Regis or the Slough Trading estate.

    Word in your shell-like Matthew, one of the aims of life is to know yourself  else you’ll always be a stranger in a pathless land. Some of what he thinks about himself is inconsistent and incompatible. These are not financial conundrums, and some aren’t even solvable by money. There is serious tension between

    • risk averse : buying in a bear market and/or starting a business
    • seeing more of his kids: starting a business
    • featherbedding his kids: retiring early

    Either way, the odds are that his children won’t have the lifestyle he or in particular his wife had. Broke is a long-form story of how that got to be that way. The short form is that the 1% are eating their lunch, they have the firepower and the deep pockets. The halcyon days of the middle classes were when there was limited mobility of capital and labour, and automation hadn’t greatly dented the need for people in running companies and administering things. University for those kids is a chimera  – the vet may need it, and at least the job isn’t outsourceable which is very wise even if she needs 4 years at university but the “I dunno” is case unproven. The world is changing, and it’s not favouring their future in a First World country. Now if they were Indian, or possibly African, the hope of middle class parents might be more likely to be fulfilled.

    It’s an interesting book, Broke. There be trouble up ahead for people with certain kinds of aspirations… Matthew could do worse than read it.

    One fair question to ask is how much of that wedge is inherited, since the BTL he finds such a PITA to run was his Gran’s flat. I’ve charitably made the assumption he’s earned/saved it. If it is inherited, you need very specific and careful skills. The middle class is going to need to learm the characteristics of old money, and if this is ancestral wealth then it’s not his to spend – it is fossil wealth that should be husbanded across the years to benefit his dynastic line, if he wants his children to remain in the middle class. Old money never eats it’s seedcorn.

    “never spend your principal 3

    That’s why it’s old money 😉 You can spend the income it throws off, but the aristocracy holds its capital in trust for its children. Preferably in assets like agricultural land 4, where old money has negotiated tax-free status for its ancestral wealth.

     

    Notes:

    1. The Trinity study was on US stocks and for a 30 year drawdown. Matthew is younger so there are good reasons to suspect he may need more
    2. because he is younger and will see more of the end-game
    3. The child-free can be more relaxed on this
    4. obviously they don’t get their hands dirty farming their estates, they get contract farmers to do that

    My circumstances are quite similar to this fellows.

    I have 3 kids. Each will have £20k to assist with their education or to start a business. However I will not fund a 3 year escape from work. They take loans for the rest and if the economics of the profession means there is no business case then it is their debt, not mine.

    Thanks for picking up on this. I agree with you that the second adviser was pretty much spot on (somewhat unusually for this type of article!)
    I’m always frustrated by what these articles don’t tell us. How did he end up with £450k in cash? My vote is for inheritance. He’s actually amassed a fair sum in his ISAs and pensions (about £415k) for a single earner with two teenage kids. I think those are probably his savings, and fair play, not bad for someone who’s probably only been working 20 years.
    I actually don’t think its feasible that he’s earned the big cash wodge as well – if he had, he’d surely be writing an early retirement blog, not asking whether he could generate £40,000 a year from £680,000!

    @Paul – that MSE article on the dynamics of student debt is most instructive. For a student with 20k in cash, it is probably unwise to use it for university. The value of that liquidity, particularly at a young age is far more valuable than a reduction of the ‘loan’. The tragedy was is calling this ‘debt’ and a ‘loan’.

    @elliott – agreed, that cash does rather point to inheritance. In which case there’s an argument that the income is his but the capital is part of the family silver. According to David Boyle, the middle class once used to understand deferred gratification at a deep level.

    As always another great post Ermine.

    I also agree that ‘free at the point of use’ is part of the problem for the NHS. I am but a simple anonymous blogger but I can’t help but think that the demand for anything (not just the NHS) with value will tend to infinity as it’s price tends to zero. With the current state of the public purse we can no longer afford infinity IMHO.

    It would be an interesting experiment to see how demand changed if punters were even charged a fiver (so far less than your French example) to get the ball rolling with your GP. I’d suggest a lot…

    17 Mar 2015, 5:19pm
    by Grumpy Old Paul

    reply

    Is there a doctor or a practice nurse in the house? I’d appreciate a view from the inside about the proportion of GP visits which are unnecessary.
    I’ve probably made an observation here about the elderly – they’re by far the biggest NHS users – health-hobbyists whose GP visits seem to be an integral part of their social life and their illnesses, real or imaginary, self-inflicted or bad luck, a mainstay of their conversations. A few months back, I discussed this issue with a GP who was a partner in a practice in the Midlands and he said that a bigger problem was the number of people who should be consulting their GP but fail to do so.
    I’m just curious which is nearest to the truth. Perhaps there are a small number of patients who are disproportionately high users of GP services. Clearly some of these will have complex and chronic conditions which require careful management but is my beef about health-hobbyists justified or just based on a few unrepresentative acquaintances?

    17 Mar 2015, 7:49pm
    by living cheap in London

    reply

    @Grumpy. Mrs LCIL says that most visits are required. Un-needed visits are mostly removed via the telephone triage system.

    Obviously a small number of people still make appointments regardless though.

    It would be interesting to know how many years are left on the mortgages, and the rates being paid. If he did nothing else investing the money, he could have spent the past couple of years clearing the mortgages as quickly as possible, and getting rid of a monthly expense that he’d have to pay out of the 40K income anyway rather than storing it as cash or cash isas at a lower yield than the interest rate paid.

    I found myself at a similar place to Matthew in my late 30s – so I took a career setback and less money to leave a management job with lots of travel to go back into technical lab work. The family may have suffered a bit financially but I was home practically every night for the next 20 years.
    My wife was a regular working Mom and we have only one daughter so maybe that option won’t be there for Matthew. It sure worked for me (and us) though.
    I know times have changed since then as well. That decision was taken in the mid 1980s. A middle class life was possible then.

    @RIT that’s an interesting use of the supply/demand curve! I suspect the insurance model is coming out way and other European countries seem to make it work better than the horrible US variant, with assistance for the poor. part of the trouble we have is either we are short of GPs or we have too many people per GP. I’ve only personally used GPs about five times since I’ve been in Suffolk, it was definitely easier to get an appointment in earlier times. The telephone system is absolutely dreadful for anybody working, since you have to basically see if you can get an appointment at 8 am or you’re stuffed – and then go that day, so you can’t tell work the day before.

    @GOP LCIL interesting that the dreadful phone system actually works!

    @David Part of Matthew’s problem is that he doesn’t know himself. Maybe Ermine Ermine and Ermine should have sent him off on a retreat/life coaching session. I have a fair amount of sympathy for him, even if he did inherit the cash. He has worked hard, and deserves a break – he probably does have the resources to certainly downshift bigtime like Ray did. What he seems to want isn’t necessarily £40k p.a. – it seems to be a less wearing lifestyle. He is trying to solve a more general problem with money. Money is a part of the solution, but fixating on a number without appreciating that there’ a sliding scale between money and quality of life may block good alternatives.

    I was impressed by the Close Brothers IFA who did say they needed to “paint a very accurate picture of their detailed lifestyle costs” – what’s actually in that 40k requirement, given it’s a little bit out of reach.

    Carrying all that cash sort of points to an inheritance, and cutting debts is a great way to ease up on income required. It has to be balanced with the opportunity cost of investing for such a young retiree though!

    @Ray one thing that book showed me (it’s very UK-centric, although the forces apply to the developed world more generally) was how much some of the established assumptions of the middle class have been undermined. The book picks out three specific arenas – pensions, destroyed by the smaller scale of personal pension savings and making people individually understand personal finance, coupled with shocking levels of fees. Education – it appears that British schools have increased in size massively. As an ex-grammar school kid I assumed the trouble was comprehensive education per se, but it seemed more the massive scale means that the teachers and kids can’t know/relate to each other, although theoretically factory schooling is cheaper per pupil. The third is the usual duality of globalisation and automation outsourcing and often eliminating the jobs they used to do, particularly middle management.

    @ermine I think we can never underestimate the power of a DB pension to make a difference in retirement.
    My parents retired in the early 1980s and lived until 2009. They had no real savings other than the money they realized when they sold their house in 2000. However their very modest DB pensions coupled with government security kept the wolf away from the door and they were happy.
    My wife and I are thankful every day that we lived in a time when DB pensions were not considered unaffordable luxuries. They have made all the difference for us.

    18 Mar 2015, 2:54pm
    by Neverland

    reply

    On the one hand the financial independence web community decry inequality but on the other we decry people who spend all their money and leave little to their kinds

    You can’t have it both ways

    the degradation of the library service isn’t the sort of thing that will impact Matthew’s finances, but it is a harbinger of tougher times to come
    and also of less civilised times to come.

    The ongoing cuts to public services are something that gives me pain daily as I work alongside them.

    The library service is being ruined and that is shame enough (and very close to my heart not least because that is where I have invested most of my working life) but the cuts to adult care, children’s services and mental health support make me want to weep.

    This will impact Matthew, even if he can afford to pay to look after his own, unless he is able to take up “looking the other way” as a sustainable way of life.

    Deciding what really matters to him should take in more than his immediate surroundings and recognise that how others live does affect his own quality of life. I defy him to claim otherwise.

    Great, thought-provoking piece (as usual) 🙂
    Thanks.

    @Neverland Ermine, Ermine and Ermine is a professional organisation. While I personally feel IHT should start at 50k, as Matthew’s IFA the three mustelids are honour bound to respect his values, even if I don’t agree with them 😉 I tried to do that – if he can’t recognise ancestral wealth his kids don’t belong in the middle class IMO.

    @Cerridwen I am reminded of John Donne’s No Man is an Island. It is Matthew’s children who will do the heavy lifting here IMO.

    The library service served the young Ermine well – the inquisitive mind at 12 used it to learn how vacuum tubes worked and scavenged these from the black and white TVs thrown out in the skips of London. I never got them to work right, but I was fired up enough to try and learn more.

    And they struck sparks across my mind with the vision of the Victor Gollancz corporation pumping out bright yellow cheesy SF that showed values and principles, though also cheesy crap. I learned to read at five times the speed of my nearest classmate, to take it all in.

    Over four decades have rolled by since then. Britain is much richer now, but Bill Bryson has a point

    When I came here the UK was poorer but much better looked after

    Thanks for the Bryson link ermine. It’s heartening to hear that he thinks of Britain as his home despite our current woes.

    I suppose that when we talk about Britain being much richer now we mean the individuals that live here, not the place (state, society) itself. Unfortunately individuals are not inclined to plant geraniums in parks, no matter how much disposable cash they have and much as that might cheer everyone up and make the world a better place.

    @Cerridwen – We should also look at the glass from a half full POV too. It’s true that most of Britain is materially a lot richer, which is reflected in many, many good things – better general health at all ages, and we don’t generally heat by coal fires, single-bar heaters and have the water freeze in winter.

    Getting richer has led in some cases to a more atomised existence, but better communications let us organise things better and flag up issues more. To take things from the selective part of the public realm I’ve had dealings with, ordinary people combined to help the calf at foot dairy to move last year; George Monbiot socked it to the NFU asking what ordinary Britons get for farming subsidy. Public discourse has different forms – we need to consider what we have gained as well as what we have lost IMO.

    Britain is still a wonderful country full of mostly decent people trying to live good lives. Some things are making this harder, but I’m not sure I’d like to get into a HG Wells time machine and be a 50-something in the 1960s, or even Bryson’s 70s. I guess I could make a killing on the markets and at least get some newfangled central heating and hot water fitted 😉

    I don’t think most sensible FI writers decry people who spend their retirement money and leave little to their kids. Indeed many have argued (eg MMM) that the best gift for one’s children is not to pamper them with money but instead to encourage them to live frugally and independently.

    After all, what is the sense in being the richest person in the cemetery? In many cases, one’s kids would benefit far more from a smaller sum earlier in life when they really need it, than a great lump of capital when they are greybeards in their 50s or 60s.

    That is one of the reasons why inheritance tax is much less pernicious than other forms of taxation. For the younger generation, beset by monster tuition fees, grossly expensive housing costs and without a generous final salary pension to look forward to, the tax system is still far too geared in favour of pensioners and those with unearned income.

    >In many cases, one’s kids would benefit far more from a smaller sum earlier in life when they really need it, than a great lump of capital when they are greybeards in their 50s or 60s.

    Whilst I agree in general with your point, that slug of money does allow big projects to be set in place prior to retirement (be they investments, property development or mortgage reduction, and perhaps a few years of school fees). The first two benefit the recipient, the last could be argued to benefit the offspring.

    What I don’t follow is the aversion to inheritance tax on principle, what we inherit should be viewed as a windfall rather than something to be an essential aspect of our financial planning. The IHT allowance is pretty generous, so if one’s property and other wealth breeches the limit the offspring are still going to see a sizeable slug. I don’t know whether IHT offends the parents or the kids, to be honest. If I could fathom that I might be able to understand who politicians are targeting every time changes to IHT are mooted.

    My father used to joke about spending our inheritance; that concept clearly distresses some offspring for the joke to have meaning. We would always reply that it was his money to do with as he pleased.

    In the current climate of paying for care for the elderly, the prospect of leaving much to one’s kids becomes far less certain in any case. Really that is a cost that the offspring do not have to pay if it comes from sale of the parent’s assets.

    Can I just say, that I am in East Cambs, and I feel your pain over the ridiculously overpaid bosses… it really disgusts me to see that amount of money going into these people’s pockets… or hairdos in a certain someone’s case.

    Cheers

    @Chronos I was being a little bit tongue in cheek with this post. Having ploughed my way through a whole book bemoaning the destruction of the middle class, in particular that their kids would be worse off than themselves the urge to be facetious and propose dynastic wealth has a solution to get and stay ahead got too much. A lot of the hurt the middle class has had is because they spend money before they’ve earned it. They used to save. And they really do need to concentrate their resources.

    I absolutely agree with you that it’s better to assist in that mid 20s – it seems not so much the tuition fees but the cost of living without an income, the maintenance side seems to be where a lot of the hurt lies. In that regard Paul is spot on, and indeed Matthew is on the wrong track IMO.

    @Hamzah – I don’t agree with it, but I think this Telegraph letter in response to this interesting piece of history sums it up. it offends both the parents and the kids, though the parents seem to be the loudest moaners. I guess these parents are coming to the end of their lives and they believe they live on through their children. They also perceive that housing is getting dearer and therefore want to give their own progeny a boost at the expense of other people’s.

    As a result the Telegraph can print absolute poppycock advocating

    Why an inheritance tax break on main homes is fairer for ALL families
    Family homes have long been exempt from capital gains tax, so simple common sense – as well as fairness – dictates that these properties should be spared inheritance tax, too

    It’s only fair on children of owner-occupiers, at the expense of everyone else in the same cohort. The error is that there is no CGT on the main residence, not that there is IHT on them.

    @M – something really weird happened in the public sector over the last 15 years. All the grunts seem to have taken the shaft while the executives feathered their nests. Looks like the rot started in the 1970s when we lost our town clerks

    Super article, and I would like to see more of Ermine, and Ermine and Ermine in the years ahead. Maybe an artistic reader could knock up a company logo/letterhead? 🙂

    One thing I will disagree with those (hey, it’s me!) is the library part being particularly an omen.

    I was coincidentally thinking about this yesterday, as I passed a library thats as always contains only a few visible people reading newspapers, eating their lunch, and generally looking a bit desperate.

    Sure this is London and the point of a library is to take the books away and read them elsewhere, but I in no way get the impression libraries are the hub of the community that the hysteria to their closing implies.

    So I was thinking about that, and then the economics. There are usually at least 2 staff in this library, and sometimes three. It’s a big chunk of space in prime London. Goodness knows how much it would cost to set up from scratch today — certainly nobody would, it’s a sunk cost that can be tarted up but you’d never get the money to justify it now.

    Anyway, I was musing to myself that it’s the Internet, Amazon and Kindle that have done for libraries. When I used them 3-4x a week as kid, information was scarce.

    Now you can read almost anything on the Web, so it’s far harder to justify the need for a book.

    If you do want the few remaining benefits of a book, then they cost in real terms far less than 20-30 years ago.

    That’s assuming you don’t just get something like Kindle Unlimited and read them for a fixed annual cost.

    As I was pondering this, I thought it’d probably be cheaper for the local council to give the remaining diehard library users an Amazon gift voucher every year / a Kindle subscription then to keep running the library.

    This wouldn’t actually work in practice, because if they did so the Middle Classes (of whom I am certainly one, and I would do this too, not a criticism) would flock to get their entitlement, rather than just buying the books from Amazon out of their own money like they do today.

    That’d make it uncompetitive.

    But that’s another issue! 🙂

    Oh dear Monevator – I am a fan and regular reader of your blog but I am going to disagree with you on libraries. I will confess to bias as I am a librarian (although a health one, not public library). I love my public library – use all its resources regularly – many of them now e.. But I’d be horrified if I got a Kindle subscription instead.
    I credit it with helping me to get the levels of literacy needed to get a degree (when it meant something). But that’s history and you’re talking about now. Literacy levels are pretty appalling in the UK and there’s plenty of evidence that books in a home are a big step in getting children to read. Is a poor household going to buy books when there are more things like heating required – I don’t think so. (Going back to the other comment about caring about the world around you, rather than just yourself) Now it’s true that middle class use libraries more BUT that doesn’t mean that there aren’t poor children out there who have been able to consume as many books as they like and pull themselves up to better literacy and all the potential that brings.

    As to usage, again from personal perspective in my own work, I can say that usage did drop in the past few years but is rising again now. In fact research seems to indicate that the teen/ 20s generation actually prefer print to ereading. My own library is currently packed with medical students studying for their exams – there were no seats available at all on Thursday.

    If you get a chance go into the British Library at St Pancreas and have a look around and go on the tour. It is packed and a fascinating place.
    Libraries have adapted to the new world – I don’t think we are buried yet.

    21 Mar 2015, 4:22pm
    by PrivateSectorWorker

    reply

    Interesting thoughts on libraries, being a hardworking taxpayer its about 25 years since I’ve even had the time to set foot in one. The Amazon voucher scheme might enable the hard working middle classes who actually pay for everything to use some council services for a change, and save on final salary pensions that are bankrupting Britain. The simplification and automation of council services could also filter through to the chief executive parasites. Maybe there could be competitive bids for who gets the senior jobs, I’m sure you could find someone half decent to run a council for 60k pa if you opened things up.

    @Monevator – question one has to be why are you such a better headline writer than I am 😉 “The middle classes are deluded” is far better as a title!

    In the future city-state of London there’s cogency to your argument. But it is a rich city and slowly driving out the poor – starting off with its ermine population in the late 1980s So it is a different country, and they do things differently there.

    In my local county library the 10 computers are always chock full. I discovered that when we were in town looking for a tea shop – Mrs Ermine has a smartphone but life is too short to use the web on that. I am surprised there are that many people younger than I who have no computer or internet access but there we go. There are a fair number of readers and borrowers. I generally order the books from via the library website and pick them up, but I totally accept that all media are cheaper in real terms now that they used to be and I can perfectly well afford to buy secondhand via Amazon of Bookfinder. The upside of the library is you get rid of the book when you’ve read it, saving storage and thinking about storage. Twice is about the most I’d read a book or watch a film, it’s not like music.

    I’m still of the view that the changes, however, are an icon of the shift from the common weal to the private realm. We see this in other areas of life – the whole state/public school debate is another facet of the same thing, as is the insurance model for the NHS. Most of us are richer now, we can afford our individualism. Though the ill winds of misfortune will ruin some who thought they were better off with individualism, others (more?) will be better off not carrying those poorer than themselves, as long as those richer than themselves don’t price them out of the market. This article on why weddings have gotten so expensive lately is an interesting take on how if you’re goign to subscribe to the individualism model, be in the 0.1% to be happy!

    Dunno about you, but I find reading stuff off the Net and from (physical) books a very different quality of information. This blog is the ill-trained prose of an amateur writer – the hurdle rate for publication is low, whereas a printed book author has to convince a publisher to take a risk; quality control is a little higher. It seems to improve the odds for me.

    In the NHS we call it “FATPOA” Free at the point of abuse.

    @Grumpy. I was a GP until I took early retirement last year. I would say that 10% of our patients caused 90% of the work, but I rarely felt that the person sitting with me was wasting my time. Most of the 10% had major physical or psychological problems, sometimes aggravated by social difficulties. If patients occasionally failed to turn up for appointments that enabled me to catch up.
    I thought that GPs who called for up-front payment for appointments were a few ear pieces short of a stethoscope. Such a system would merely add to the burgeoning practice bureaucracy involved in keeping the NHS happy. You would have to submit regular figures for the number of consultations carried out, and have the money that you would be deemed to have collected deducted from your NHS payments. Count too many consultations and you would lose money, count too few and you might be prosecuted for fraud. When you add the hassles and expense of handling fairly large sums of money, you have to ask what problem you are trying to solve.

    “Hopefully Britain will adopt the German or French method of co-payment rather than the ghastly US system”: the US system is so barmy and extravagant that there’s not the slightest chance of its being introduced here. Nil. Zero. It’s just ghost stories to make your flesh creep.

    “Teach them the values of grit and determination”: one of the more interesting recent discoveries of psychologists is that, except in the most extreme cases, it seems not to matter much how you bring up your children – you will have almost no sustained effect. Apparently the affect of their “peers” is larger. Which would explain private schools – you get a chance to choose their peers.

    15% going to university: if that’s about the proportion of Swiss who go to university, it sounds about right. Canny buggers, the Swiss.

    @dearime
    “one of the more interesting recent discoveries of psychologists is that, except in the most extreme cases, it seems not to matter much how you bring up your children – you will have almost no sustained effect. Apparently the affect of their “peers” is larger.”
    Really? I’d like to read the research if you can point me to it. It seems counter intuitive to me- especially when I hear myself saying things to my daughter that my mother used to say to me!
    @Ermine- great blog- always learn something.

    @Marco and Duncurin – interesting – changing things will be tough! I hope there is something we can learn from other countries.

    @Romany, @dearieme – I’ve heard that theory too. This Scientific American interview with the author sums it up well. It supports dearime’s thesis – what you buy with private schooling is excluding troublemakers and the disaffected. You probably also buy smaller classes, which reduces the tendency to split into pro and anti groups.

    It also seriously challenges the tenets of comprehensives, because these have to be big to work cost-effectively it seems which brings about the alienation between teachers and kids identified in Broke.

    So selection by ability may have also got better results through correlation, not causation, simply by having two or three schools serving the schoolchild base now served by one massive comp.

    @Sarah @ermine — Don’t get me wrong, I loved libraries in my youth out in the provinces. I’ve been to the British Library many times and adore even the smell of old books.

    And world class libraries like the British Library clearly aren’t going anywhere, even if to some extent they are subsidised research facilities for middle-class authors.*

    I am just stating we need to be careful about applying the values and realities of 20 years ago to today.

    Everything has changed with respect to information. It has ripped apart and re-shaped publishing. It has done the same with music, and likely the revolution is upon us in video/TV soon, too.

    I am simply questioning whether the taxpayer should really underwrite libraries in the face of that, based on a reality in my view of yesteryear.

    But I know it’s a controversial view, and at odds with my Radio-4-is-glued-on-the-dial personal habits. 🙂

    *I don’t mind that subsidy at all. But in terms of Ermine’s ‘transfer from the common weal’ I’d imagine most of Joe Populace would rather the ever rallying cry of “more doctors and nurses”.

    p.s. Forgot to say I accept London may be in the vanguard here, but I think the overall truth stands. Using computers etc is a very short term thing. Basic computers/Internet accessing devices will be all-but-free in the next 5-10 years for everyone.

    24 Mar 2015, 10:48am
    by Marky Mark

    reply

    Late to the debate as usual but I fully support my local library network as much as I can. I used to buy books, read them once then let them clutter up my home. No more, only a few that I would read again and again, I’d much rather borrow. I’ve even nipped out and borrowed a copy of ‘Broke’ since reading this post. (I notice that your pin-up girl Shona S appears in the intro to this book! You didn’t write it, did you, Erms???)

    Here in Telford they’ve recently opened a brand spanking new library next to a new complex of Cinema and late-night eateries, yet surprise, surprise! despite all the other businesses staying open til midnight, the library closes at – 6pm.

    Why do public services still operate on 1950s opening hours??

    I was at my library this morning and I love going there, despite the fact that they’ve put in a cafe and the place is like a creche….I remember when libraries were quiet, reflective places! I tell myself at least they’re trying to earn some cash to make it pay. Interesting post though. I too wondered where Matthew got the cash. I read the other day that the most shared attribute of so-called entrepreneurs was that they had received a substantial inheritance. I chuckled a bit when I saw that Matthew and his wife are considering the middle class dream of owning a coffee shop, a one way ticket to financial, physical and mental despair.

    […] sell their children’s labour without realising it – for example grizzled BTL landlords staying in the middle class by rental income puzzled by why their adult children are still living at home. The residual 0.9% […]

    25 Mar 2015, 1:03pm
    by Robert Harrison

    reply

    Ermine,

    Interesting to see your mention of Deborah Cadman.

    Back around 1990 I taught her how to use a calculator to work out percentages.

    She hasn’t looked back in her career since then. 🙂

    She was a pleasant young woman in those days. I’ll have to assume she hasn’t changed much.

    Bob.

    @Robert – I thought the calculator was within the bounds of reason until I discovered she is only a little younger than I am, born in ’63 and therefore should have been taught better!

    […] People have had the time to write books about the problem. Ermines have written posts on how the middle class needs to wake the ***k up and get ready to take the sucker punch, middle class families on the brink, savoured the […]

    6 Aug 2016, 5:49pm
    by Forgot my name

    reply

    The middle classes are really f….. up these days. Where I live people are happy to earn 1000 eur/month and many live on much less. It’s crazy how they take on mortgages and have 2-3 kids. Really unbelievable. Your blog (+ERE and MMM) is an oasis of rationality and fresh air. People just dont get it. Majority 2-3 wages from banktrupcy.

     

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